Question

If quarterly payments are made for 15 years, find the value for n in the following present value ordinary annuity formula

Answer 1

b. (60)

correct on edgen

Answer 2

The value for n in the following present value ordinary annuity formula is 60.

Explanation:

We know that,

`\text{PV}=P\left[(1-(1+r)^(-n))/(r)\right]`

Where,

PV = Present value of annuity,

P = Periodic payment,

r = Rate of interest per period,

n = Number of period.

As here the payment is made in each quarter i.e 4 times a year for 15 years.

So number period or n in this case will be,

`=15* 4=60`

Therefore, the value for n in the following present value ordinary annuity formula is 60.